Where Exiting PRS Landlords Are Redeploying Capital in 2026 (And the Option Most Are Missing)

220,000 Rental Properties Are Disappearing This Year. Where Is the Money Going?

If you're a London landlord, you've almost certainly felt the squeeze. Between rising mortgage costs, tightening regulation, and the ongoing fallout from Section 24 tax changes, the private rented sector is bleeding properties at a historic rate. According to recent data from the NRLA, an estimated 220,000 homes are projected to leave the PRS in 2026 alone.

That's a staggering number. And it raises an important question: what are all those exiting landlords actually doing with their capital?

The NRLA's own research paints a clear picture. Many are shifting into REITs (Real Estate Investment Trusts), property funds, and other passive alternatives. Some are consolidating into fewer, higher-value single-property holds. Others are simply selling up and sitting on cash, unsure of where to go next.

But there's one option that consistently gets overlooked, and it might be the smartest move of all: repositioning an existing property as professionally managed serviced accommodation.

Let's break down the main strategies landlords are turning to, examine what works and what doesn't, and explore why keeping your property and switching to short-term lets could be the highest-yield, lowest-hassle option on the table.

The Popular Exit Routes (And Their Hidden Drawbacks)

REITs: Liquidity with a Loss of Control

REITs are the most commonly cited alternative for landlords leaving the PRS. They offer exposure to property markets without the headaches of direct ownership. You buy shares, collect dividends, and let professional fund managers handle the rest.

Sounds appealing, right? On the surface, yes. But dig deeper and the cracks appear.

First, you're giving up all control. You can't influence which properties the fund buys, how they're managed, or when they're sold. Second, REIT returns have been volatile in recent years, with many UK-focused residential REITs delivering annual yields of just 3 to 5 percent after fees. Third, you're now exposed to stock market sentiment, not just property fundamentals. Your investment can drop 10 percent in a week because of something completely unrelated to bricks and mortar.

For landlords who've spent years building hands-on property portfolios, the passive nature of REITs can feel deeply unsatisfying.

Property Funds: Tied Up and Opaque

Property funds offer a middle ground between direct ownership and pure stock market exposure. But they come with their own baggage. Many open-ended property funds have gating provisions, meaning you can't access your money when the market turns. We saw this play out dramatically during the post-Brexit referendum period and again during the 2022 gilt crisis.

Fees are another concern. Annual management charges of 1 to 1.5 percent, plus performance fees in some cases, eat into already modest returns. And like REITs, you have zero say in the underlying assets.

Single-Property Holds: Better, But Still Limited

Some landlords are choosing to sell part of their portfolio and concentrate capital into one or two premium properties. This preserves direct ownership and the tax advantages that come with it, particularly if the property is held within a limited company structure.

The challenge? A single AST (Assured Shorthold Tenancy) on a London property still delivers relatively modest yields of around 3 to 5 percent net in most boroughs. You've simplified your portfolio, but you haven't solved the yield problem.

The Strategy Most Landlords Haven't Considered

Here's where things get interesting. If you already own a property in London, you don't have to sell it to improve your returns. You don't have to hand your capital to a fund manager. And you certainly don't have to accept single-digit yields as the best you can do.

Serviced accommodation, when managed by a professional operator like Airhosts, allows you to keep your property, retain full ownership and control, and access yields that can be two to three times higher than a traditional long-term tenancy.

How Serviced Accommodation Works

Instead of letting your property to a single tenant on a 12-month AST, your property is furnished to a high standard and offered as a short-term let. Guests book stays ranging from a few nights to several months through platforms like Airbnb, Booking.com, and direct booking channels.

A professional management company handles everything: listing optimisation, dynamic pricing, guest communications, cleaning, linen, maintenance, and compliance. As the property owner, you receive regular income without day-to-day involvement.

The Yield Difference Is Real

Let's put some numbers on it. A well-located one-bedroom flat in zones 1 to 3 of London might generate £1,400 to £1,800 per month on a long-term let. That same property, professionally managed as serviced accommodation, can generate £2,500 to £4,000 per month in gross revenue, depending on location, seasonality, and property quality.

Even after management fees and operating costs, net yields of 8 to 12 percent are realistic for well-positioned London properties. Compare that to the 3 to 5 percent you'd get from a REIT, a property fund, or a standard AST.

What You Need to Know Before Making the Switch

Serviced accommodation isn't a magic wand, and it's important to go in with your eyes open.

Planning and licensing: In many London boroughs, short-term letting is subject to the 90-day rule for entire properties listed on platforms like Airbnb. However, properties with planning permission for short-term use, or those operated as serviced apartments, can let year-round. A knowledgeable operator will guide you through the compliance landscape.

Furnishing and setup: Your property needs to be guest-ready, meaning quality furniture, professional photography, and the right amenities. There's an upfront investment, but it's modest compared to the revenue uplift.

Occupancy isn't guaranteed: Seasonality, local competition, and pricing strategy all affect performance. This is precisely why working with an experienced operator matters so much. Poor management leads to poor results.

The right operator makes all the difference: This is the single most important variable. A great management company will maximise your revenue, protect your property, and keep you fully compliant. A bad one will cost you money and peace of mind.

Why Professional Management Beats Going It Alone

Some landlords try to manage short-term lets themselves, and quickly discover it's a full-time job. Guest enquiries at midnight, last-minute cancellations, coordinating cleaners, handling complaints, optimising pricing across multiple platforms. It's relentless.

This is exactly why companies like Airhosts exist. With a full-service management model built specifically for London's short-term rental market, Airhosts handles every aspect of operations so you don't have to. From professional listing creation and dynamic pricing algorithms to 24/7 guest support and regulatory compliance, the entire process is designed to maximise your income while keeping things completely hands-off for you.

Comparing Your Options Side by Side

When you lay the alternatives out clearly, the picture becomes hard to ignore:

• REITs: 3 to 5 percent yield, no control, stock market volatility, full liquidity risk
• Property funds: 3 to 6 percent yield, gating risk, high fees, zero transparency
• Long-term AST: 3 to 5 percent yield, full control, but limited upside
• Serviced accommodation with Airhosts: 8 to 12 percent net yield, full ownership retained, hands-off management, London-specific expertise

The first three options either sacrifice yield, control, or both. Serviced accommodation is the only strategy that lets you keep your asset, improve your income, and stay genuinely hands-off.

The Bottom Line for London Landlords

The mass exodus from the PRS is real, and it's accelerating. But selling up and shifting into passive investments isn't the only path forward. For London landlords who want to preserve their property exposure, dramatically improve their yield, and avoid the liquidity traps and hidden fees of funds and REITs, repositioning into professionally managed serviced accommodation is the clearest, most compelling option available in 2026.

If you own a property in London and you're weighing your next move, talk to the team at Airhosts. We'll give you an honest, no-obligation appraisal of what your property could earn as a serviced accommodation unit, and show you exactly how we'd make it happen. Your property. Your ownership. Our expertise. Better returns.

Get in touch with Airhosts today and find out what your property is really worth.